AEC Education

LONG-TERM BUY

13/12/2011 Miles Nolan

Educational programmes to examinations provider AEC Education (AEC) has warned on profits due to both a poor performance in Malaysia and weakness in its LCCI business.

Though the AIM counter secured a return to the black at the interim stage, the second half is now expected to fall short of expectations. Student numbers in Malaysia have stumbled due to the turmoil of the Arab Spring - particularly from North Africa. It has taken steps to reduce costs, but the expectation is that volumes will recover.

Examination entries for LCCI exams in Hong Kong are also lower than hoped as a result of educational reforms in the country. Again, costs have been cut and AEC has now reduced its exposure to Vietnam after deeming the opportunity not sufficiently attractive.

The flagship college in Singapore is doing very well, buoyed by its enhanced status of being one of only 27 private education institutions to have gained the four-year EduTrust Certificate. AEC continues to work closely with universities and has had success expanding its english language school Malvern House. Three new local partnerships are planned for Ireland, Cyprus and Oman, though expected to break even in 2012, the ventures will lead to a £400,000 write off.

House broker WH Ireland has more than halved its 2011 pre-tax profit forecasts to £300,000 (EPS of 0.49p), on sales of £19m. For 2012, the expectation is of a £1m pre-tax profit and EPS of 1.5p. AEC has a chunky £3m cash balance, which equates to 7p a share and substantially underpins the current share price. There is also a useful 2.1% yield.